(3) Every director or manager of a company who approves or authorises, the purchase or acquisition of the company’s own shares or the release of obligations, knowing that the company is not solvent shall, without prejudice to any other liability, be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 or to imprisonment for a term not exceeding 3 years.

[21/2005]

(4) For the purposes of this section, a company is solvent if —

(a)

the company is able to pay its debts in full at the time of the payment referred to in subsection (1) and will be able to pay its debts as they fall due in the normal course of business during the period of 12 months immediately following the date of the payment; and

(b)

the value of the company’s assets is not less than the value of its liabilities (including contingent liabilities) and will not after the proposed purchase, acquisition or release, become less than the value of its liabilities (including contingent liabilities).

[21/2005]

(5) In determining, for the purposes of subsection (4), whether the value of a company’s assets is less than the value of its liabilities (including contingent liabilities), the directors or managers of a company —

(a)

must have regard to —

(i)

the most recent financial statements of the company that comply with section 201(1A), (3) and (3A), as the case may be; and

(ii)

all other circumstances that the directors or managers know or ought to know affect, or may affect, the value of the company’s assets and the value of the company’s liabilities (including contingent liabilities); and

(b)

may rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances.

[21/2005]

(6) In determining, for the purposes of subsection (5), the value of a contingent liability, the directors or managers of a company may take into account —

(a)

the likelihood of the contingency occurring; and

(b)

any claim the company is entitled to make and can reasonably expect to be met to reduce or extinguish the contingent liability.

[21/2005]

[Companies, s. 76F (modified)]

History for Provision
'76F Payments to be made only if company is solvent'.